[Exclusive] Catch the '1 Trillion Won' Pureun Seed... Intensified Competition in Fund Management Due to Differential Reserve Allocation

Decision by Fund System Operation Committee in March
A 0.5-Point Gap Determines Asset Managers' Fortunes
Samsung○○○○ Receives 49% Fund Allocation
Mirae Asset○○ Gets 51%, Up by 1% Point
Competition Encouraged to Improve Yields
Regulations Allow Up to 10% Differentiation

The Korea Workers' Compensation and Welfare Service adjusted the fund allocation ratio for the dedicated management institutions of the trillion-won scale 'Small and Medium Enterprise Retirement Pension Fund (Pureun Seed)'. Until last year, Samsung○○○○ and Mirae Asset○○ had equal shares, but this year they decided to differentiate the ratio to 49% and 51%, respectively. As a result, Mirae Asset○○ secured approximately 20 billion KRW in additional funds.

Kim Moon-soo, Minister of Employment and Labor, is speaking at a meeting of workplaces enrolled in the Small and Medium Enterprise Retirement Pension Fund (Pureun Seed) held at the Seoul Joint Office of the Korea Workers' Compensation and Welfare Service in Yeongdeungpo-gu, Seoul, in February.

On the 8th, the Korea Workers' Compensation and Welfare Service at the Pureun Seed Fund System Operation Committee (the highest decision-making body) held on the 10th of last month, approved this year's fund operation plan and the agenda on differentiated fund allocation based on last year's asset management institution performance evaluation. Accordingly, starting this year, when allocating the reserves excluding short-term funds for retirement benefit payments (4.5%), they decided to differentiate the allocation between Samsung○○○○ and Mirae Asset○○.

Last year, since there was no performance evaluation from the previous year, the funds were allocated equally between the two institutions. This year, Mirae Asset○○ led Samsung○○○○ by 0.5 points in last year's performance evaluation, resulting in more funds being allocated to Mirae Asset○○ (51%) than Samsung○○○○ (49%). An external source familiar with the Pureun Seed system said, "Even a 1% difference amounts to about 20 billion KRW, which is not insignificant," adding, "As the reserves grow, the gap in fund allocation may also increase."

Pureun Seed is the only fund-type retirement pension system introduced in Korea in September 2022. It was introduced to help workers at small and medium-sized enterprises with fewer than 30 employees prepare for retirement, and the number of subscribers has rapidly increased, with reserves reaching 1.03 trillion KRW as of the end of last year. This year, it is expected to grow to about 1.75 trillion KRW. Some expect that if this growth trend continues, the reserves could increase to 2 trillion KRW.

The Korea Workers' Compensation and Welfare Service reportedly limited the differentiation ratio to 1% this year, considering it is the first year of implementation. In the future, the degree of differentiation is expected to increase depending on the performance evaluation results of the two institutions. According to the Fund System Operation Committee regulations, the fund allocation differentiation can be up to 10%. As the fund size grows, the competition between asset management institutions is bound to become more intense.

The Korea Workers' Compensation and Welfare Service plans to induce competition among asset management institutions to increase the Pureun Seed fund's yield. Based on performance evaluations, they will decide whether to maintain the status of the dedicated management institutions, determine the proportions of fund allocation and recovery, and pay performance-based fees differentially. If the reserves increase beyond a certain scale in the future, they may increase the number of dedicated management institutions to improve yields.

A representative from the Korea Workers' Compensation and Welfare Service was cautious about disclosing details regarding fund allocation among management institutions, stating, "Differentiation has been applied starting this year," but declined to provide specific information. Regarding the possibility of expanding management institutions, they responded, "Considering the current fund size, there are no plans to increase the number." However, they added, "For the stable retirement of more workers in the future, expanding management institutions will be necessary, and we will prepare for this in advance."